What are stock compounders?

Features | Concepts | 4 Mins Read | by

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Professionals like to become known for a new term, concept or acronym. I am no exception. My big idea is the concept of stock compounders. It is used to describe the companies that drive the market forward.

I recently gave a presentation for the CFA Society of the UK with the subject:

 

Stock Compounders drive markets.

 

The term “stock compounders” describes durable businesses that offer an attractive combination of quality and growth.

The quality of a company alone says nothing about its ability to grow. A quality company without growth is similar to a high yield bond i.e. all the cash flow is paid out to investors.

Professor Bessiminder has highlighted that a few stocks drive the market - Do Stocks Outperform Treasury Bills? One in 281 stocks generated the majority of the US equity market’s outperformance from 1916 to 2016.

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What are stock compounders?

Features | Concepts | 4 Mins Read

Professionals like to become known for a new term, concept or acronym. I am no exception. My big idea is the concept of stock compounders. It is used to describe the companies that drive the market forward.

I recently gave a presentation for the CFA Society of the UK with the subject:

 

Stock Compounders drive markets.

 

The term “stock compounders” describes durable businesses that offer an attractive combination of quality and growth.

The quality of a company alone says nothing about its ability to grow. A quality company without growth is similar to a high yield bond i.e. all the cash flow is paid out to investors.

Professor Bessiminder has highlighted that a few stocks drive the market - Do Stocks Outperform Treasury Bills? One in 281 stocks generated the majority of the US equity market’s outperformance from 1916 to 2016.

Sign up to read full article.

Get FREE access now

Already a member? Login